MicroStrategy Announces Fourth Quarter 2017 Financial Results

01-25-18

TYSONS CORNER, Va.--(BUSINESS WIRE)--
MicroStrategy® Incorporated (Nasdaq: MSTR), a leading
worldwide provider of enterprise analytics and mobility software, today
announced financial results for the three-month period ended
December 31, 2017 (the fourth quarter of its 2017 fiscal year).

Fourth quarter 2017 revenues were $138.1 million versus $140.1 million
for the fourth quarter of 2016, a 1.4% decrease. Product licenses and
subscription services revenues for the fourth quarter of 2017 were $40.8
million versus $45.8 million for the fourth quarter of 2016, a 10.9%
decrease. Product support revenues for the fourth quarter of 2017 were
$75.0 million versus $72.7 million for the fourth quarter of 2016, a
3.2% increase. Other services revenues for the fourth quarter of 2017
were $22.3 million versus $21.6 million for the fourth quarter of 2016,
a 3.1% increase. Foreign currency effects had a favorable impact on
revenues for the fourth quarter of 2017.

Operating expenses for the fourth quarter of 2017 were $94.6 million
versus $80.1 million for the fourth quarter of 2016, an 18.2% increase.
MicroStrategy did not capitalize any software development costs during
the fourth quarter of 2017 or 2016.

Income from operations for the fourth quarter of 2017 was $18.8 million
versus $36.7 million for the fourth quarter of 2016. Net loss for the
fourth quarter of 2017 was $26.2 million, or $(2.29) per share on a
diluted basis, as compared to net income of $31.1 million, or $2.69 per
share on a diluted basis, for the fourth quarter of 2016. This net loss
included an estimated one-time tax charge of $44.0 million resulting
from the recent enactment of U.S. corporate tax reform legislation. This
charge is comprised of a $40.3 million tax expense related to the
mandatory deemed repatriation of certain foreign earnings and profits,
which we intend to elect to pay over an eight-year period beginning in
2018, and $3.7 million related to the re-measurement of net deferred tax
assets arising from the new lower corporate tax rate effected by the
legislation. Excluding the impact of this legislation, non-GAAP net
income for the fourth quarter of 2017 was $17.8 million, or $1.55 per
share on a diluted basis.

Additionally, non-GAAP income from operations, which excludes
share-based compensation expense and restructuring costs, was $22.5
million for the fourth quarter of 2017 versus $40.1 million for the
fourth quarter of 2016. The tables at the end of this press release
include a reconciliation of GAAP to non-GAAP financial measures for the
three months ended December 31, 2017 and 2016. An explanation of
non-GAAP financial measures is also included under the heading "Non-GAAP
Financial Measures" below.

As of December 31, 2017, MicroStrategy had cash and cash equivalents and
short-term investments of $675.2 million, as compared to $589.4 million
as of December 31, 2016, an increase of $85.8 million. As of
December 31, 2017, MicroStrategy had 9.4 million shares of class A
common stock and 2.0 million shares of class B common stock outstanding.

Conference Call

MicroStrategy will be discussing its fourth quarter 2017 financial
results on a conference call today beginning at approximately 5:00 p.m.
EST. To access the conference call, dial (844) 824-7425 (domestically)
or (716) 220-9429 (internationally) and use conference ID 2991359. A
live webcast and replay of the conference call will be available under
the "Events" section on MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.
The replay will be available beginning approximately two hours after the
call concludes until February 1, 2018 at (855) 859-2056 (domestically)
or (404) 537-3406 (internationally) using the passcode 2991359. An
archived webcast will also be available under the "Events" section on
MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.

In December 2017, MicroStrategy announced the general availability of
MicroStrategy 10.10, the newest feature release to the company's
MicroStrategy 10™ platform. This feature release empowers business teams
to confidently embrace an enterprise-wide, data-driven culture by
introducing two exciting products -- a completely redesigned and more
powerful MicroStrategy Desktop™ and the new MicroStrategy Workstation.

"We are incredibly excited to release MicroStrategy 10.10, which
empowers business teams to confidently author, promote and certify
analytics content, operationalize dossiers, and deliver the agility a
business needs, along with the governance that IT requires," said Tim
Lang, Senior Executive Vice President and Chief Technology Officer,
MicroStrategy Incorporated. "The latest capabilities in MicroStrategy
10.10 are part of MicroStrategy's commitment to deliver the next
generation of enterprise analytics to our customers so they can discover
growth opportunities, solve complex business problems, and drive real
results."

MicroStrategy 10.10 builds on the game-changing release of MicroStrategy
10.9™, which introduced the Dossier™ feature and MicroStrategy Library™.
Dossier and MicroStrategy Library deliver a new storybook experience for
everyone across the enterprise and make it easy to consume, share, and
collaborate around analytics. MicroStrategy 10.10 builds on these
features by empowering analysts, developers and administrators to
author, promote and operationalize the Dossier and MicroStrategy Library
functionalities via MicroStrategy Desktop and MicroStrategy Workstation,
in addition to web interfaces.

Redesigned MicroStrategy Desktop Promotes Data-Driven Culture

The newest generation of MicroStrategy Desktop, MicroStrategy's free
data discovery tool, delivers a completely redesigned interface and
significant enhancements to the previous version. Available for both PC
and Mac, the client allows users to connect to more than 80 data sources
and easily build powerful dossiers to visually tell stories with data.
For the first time, analysts and data scientists are able to work in a
secure, collaborative environment either offline or online by connecting
to the MicroStrategy Server™, on-premise or in the cloud. By connecting
to and working directly on the MicroStrategy Server, MicroStrategy
Desktop users can more easily leverage the platform capabilities, such
as discussion threads and alerts and notifications, to drive adoption
across the workforce. Download
MicroStrategy Desktop for free today.

MicroStrategy 10.10 introduces MicroStrategy Workstation, a new addition
to the MicroStrategy product line. This powerful tool gives
administrators and content developers the ability to quickly and easily
build and maintain scalable enterprise content, create users and groups,
assign security roles, schedule and publish data mashups for business
teams, and do much more. MicroStrategy Workstation delivers these
administrative capabilities to both the PC and Mac via a powerful client.

New Certification Capability Operationalizes Governed Data
Discovery

MicroStrategy Desktop and MicroStrategy Workstation allow analysts, data
stewards and administrators who have the "certifier" privilege to
watermark dossiers and analytics content with a "certified stamp." With
this capability, business teams can identify and highlight trusted
dossiers that are built on certified and approved data, and can
confidently broadcast that to a larger audience. This helps teams boldly
deploy self-service capabilities, while facilitating governance and
confident access to trusted data at the departmental level.

MicroStrategy Workstation Administrators Can Provision New Cloud
Servers with AWS in a Matter of Minutes

MicroStrategy Workstation's intuitive visual interface allows
administrators to easily spin up and manage an enterprise analytics
environment in the cloud in a matter of minutes. Administrators can
accomplish this without leaving the interface. Administrators can create
multiple MicroStrategy on AWS connections from MicroStrategy Workstation
and control the environments by being able to start, stop, restart and
terminate the cloud server directly from MicroStrategy Workstation.
Further management of the cloud server can be performed from the
administrative portal.

MicroStrategy Workstation simplifies the process of creating and
managing users and user groups, assigning security roles, and managing
access permissions. By bringing these powerful administrative
capabilities to a user-friendly and modern interface, version 10.10
makes it easier to organize teams for secure and personalized sharing
and collaboration - all with the necessary governance in place.
Administrators can access a user-friendly interface to easily change the
security role of users or user groups and control their ability to
browse, read, use, execute, write, delete and control dossiers,
documents or reports. With version 10.10, the most commonly used roles
are readily available to be assigned to users: Administrator, Certifier,
Analyst and Consumer. Beyond that, administrators can customize and
restrict security access (ACLs) as needed.

With MicroStrategy 10.10, new data connectors, such as data.world,
Neo4j, TapClicks, Microsoft Azure Cosmos DC and SurveyMonkey, are
available in theConnector Gallery of the MicroStrategy
Community. With version 10.10, organizations can add custom
connectors to all MicroStrategy authoring interfaces, including
MicroStrategy Workstation and MicroStrategy Desktop, via the Data
Connector API. With the ability to leverage new and unique connectors,
organizations can use all MicroStrategy authoring interfaces to easily
build analytics and mobility applications.

100+ Enhancements Available Across the MicroStrategy Platform

In addition to the newest generation of MicroStrategy Desktop and the
release of MicroStrategy Workstation, version 10.10 delivers dozens of
new features across MicroStrategy Web, MicroStrategy Mobile™,
MicroStrategy on AWS, APIs, MicroStrategy Server, and Usher®,
along with several performance and reliability enhancements across the
platform. New enhancements include:

Improvements in hierarchy reporting with optimized filtering
performance to handle large hierarchies more efficiently;

iOS11 certification for the MicroStrategy Mobile and MicroStrategy
Library apps for iPads;

Ability to deploy MicroStrategy on AWS on Amazon Linux; and

Significant enhancements to Usher Professional™, making it a more
robust enterprise directory and communications tool.

MicroStrategy 10.4™ Hotfix 6 Generally Available to Customers

Alongside the MicroStrategy 10.10 feature release, MicroStrategy 10.4
hotfix 6 became generally available to customers. This hotfix improves
overall product stability, includes over 150 customer-reported
enhancements and fixes across the platform, and introduces several
stability, performance, and security enhancements to the MicroStrategy
10.4 platform release.

Customers can apply the 10.4.6 hotfix directly on top of their existing
10.4 deployments since it already includes the earlier hotfixes. The
10.4.6 hotfix is available on Windows, Linux, AIX and Solaris and can be
downloaded here.
This hotfix does not require a metadata update, but rather lays down the
patches on top of your existing environment.

In December 2017, MicroStrategy announced that Dresner Advisory Services
named MicroStrategy a leader in the "2017 Wisdom of Crowds®
Embedded Business Intelligence Market Study" report. Twenty-four
business intelligence (BI) and analytics providers offering embedded
analytics solutions were evaluated based on a set of criteria in two
categories of functionality: "features" and "architecture."
MicroStrategy was a top vendor for product features.

"We congratulate MicroStrategy on their performance in this year's
study," said Howard Dresner, President, Founder and Chief Research
Officer of Dresner Advisory Services. "Our research shows that embedded
BI is in the top third of all technologies and initiatives strategic to
business intelligence, behind the most mainstream BI practices
(reporting, dashboards, and end-user self-services), but ahead of other
widely discussed initiatives including cloud, Big Data, and IoT. This
reflects the growing demand for embedded technologies, and the overall
expansion of business intelligence and analytics in the world today."

According to the report, the most important objective for embedded BI
today is "in-context insights and analysis," followed closely by
broadening the access to data throughout an organization internally.
Specific to the functionality criteria, user respondents stated that
today's BI users prefer lightweight, embedded-BI architecture, most
often through HTML and web services. The report also discusses how users
look for embedded-BI features to support manipulation of non-static BI
objects through drill-down and filtering, as well as functionality such
as single sign-on.

The Dresner study is the latest in a line of increasing industry
recognition for MicroStrategy, which was named a leader in "The
Forrester Wave™: Enterprise BI Platforms With Majority On-Premises
Deployments, Q3 2017" report, and named a market leader and ranked
first in data discovery product capabilities in the BARC Score Data
Discovery Report, published in July 2017. To download a copy of the
"2017 Wisdom of Crowds Embedded Business Intelligence Market Study,"
click here.

MicroStrategy Held 21st Annual World
Conference in Las Vegas

In January 2018, MicroStrategy hosted its 21st annual user
conference, MicroStrategy World™ 2018, at The Cosmopolitan of Las Vegas.
MicroStrategy World 2018 brought thousands of product experts, thought
leaders and MicroStrategy users together for a full three-day conference
of technology-focused discussion, with over 200 sessions and 70 customer
speakers. The conference showcased MicroStrategy advancements that are
shaping the future of enterprise analytics.

MicroStrategy 10.10, the newest feature release on the MicroStrategy 10
platform, took center stage at MicroStrategy World. Attendees saw demos
of the latest capabilities in MicroStrategy 10.10 and got hands-on
experience with the next generation of enterprise analytics so they can
discover growth opportunities, solve complex business problems, and
drive real results.

More than 200 presentations explored innovative uses of enterprise
analytics and mobility and how these technologies can be applied to
drive business success. Topics included AI and machine learning, AWS,
Big Data and Hadoop technologies, including Spark and Cloudera, custom
and D3 visualizations, enterprise adoption, IoT, mobile analytics apps
for iPad and Android devices, Natural Language Generation, R and
advanced analytics, and security. Sessions also showcased key analytics
and mobility business solutions for a wide range of industries and
functions, including retail, finance and healthcare.

Leading Experts Discussed the Future of Analytics

Attendees heard inspirational stories from industry leaders, visionary
voices, change agents and expert practitioners on how MicroStrategy and
the power of analytics, Big Data, mobile, IoT and AI applications has
helped them to deliver the best and most innovative solutions to the
enterprise.

Interactive panel discussions with MicroStrategy's Customer Award
winners offered attendees the opportunity to learn about the
innovative analytics and mobility apps developed by these visionary
leaders.

MicroStrategy's inaugural Datathon kicked off the conference, where
teams of up to five people had the opportunity to face off and compete
to create innovative applications, leveraging capabilities including
predictive analytics, mobile apps, hundreds of powerful APIs and much
more, all of which are available with the MicroStrategy platform. Teams
presented their applications and the winning team received a $10,000
prize.

New Channel Partner Program Unveiled at Partner Day

At Partner Day, MicroStrategy channel partners learned about new sales
and marketing tools and programs designed to support channel partner
success. Channel partner organizations also got facetime with
MicroStrategy's senior leadership and met their peers from around the
world at this exclusive channel partner event.

Attendees Participated in Hands-on Workshops

MicroStrategy World 2018 offered 16 instructor-led different workshops
to develop tangible skills and training using the latest capabilities of
MicroStrategy 10. These interactive sessions provided a great
opportunity to get hands-on experience building next-generation
analytics and mobility applications.

Inspiring Women Leaders at the Women's Networking Event

World attendees converged at the Women's Networking Event, where
MicroStrategy customers, partners, and employees had the opportunity to
meet with and hear from inspiring women leaders and savvy female
executives and learn about their great work across the world of
analytics.

The "Urban Fun Run" Benefitted D.C.-based Non-profit STEM for Her

MicroStrategy sponsored and co-hosted an Urban Fun Run with Datastrong,
a BI and data warehousing solutions provider. All proceeds from the
event benefitted STEM
for Her, a non-profit foundation that supports young women and girls
in the Washington, D.C. region who are interested in pursuing careers in
science, technology, engineering and math fields of study.

Many Visionary Voices in a New TED Talks-style Track

MicroStrategy debuted "Visionary Voices," a new TED Talks-style track to
engage and inspire all of our conference attendees. A wide range of
innovative speakers and industry leaders, including our day two keynote
headliner Billy Beane, a fascinating former NASA astronaut and veteran
of four space flights, and many more influential speakers offered their
perspectives and stories on data, analytics, business, and the impact of
technology on everyday life.

MicroStrategy Professional Services™ Hosted its "TechTalk" Series

MicroStrategy Professional Services hosted its annual "TechTalk" series,
a great opportunity for conference attendees to meet one-on-one with an
experienced MicroStrategy consultant ready to share a wealth of
expertise about their MicroStrategy implementations.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for income
from continuing operations that excludes the impact of share-based
compensation arrangements and restructuring activities, and for net
income and diluted earnings per share that exclude the impact from the
recent enactment of U.S. corporate tax reform legislation. These
supplemental financial measures are not measurements of financial
performance under generally accepted accounting principles in the United
States ("GAAP") and, as a result, these supplemental financial measures
may not be comparable to similarly titled measures of other companies.
Management uses these non-GAAP financial measures internally to help
understand, manage and evaluate business performance and to help make
operating decisions. MicroStrategy believes that these non-GAAP
financial measures are also useful to investors and analysts in
comparing its performance across reporting periods on a consistent basis
because in the case of the supplemental measure for income from
continuing operations, it excludes a significant non-cash expense that
MicroStrategy believes is not reflective of its general business
performance and restructuring charges that we believe are not reflective
of ongoing operating results, and in the case of the supplemental
measures for net income and diluted earnings per share, they exclude
one-time tax charges from the recent enactment of U.S. corporate tax
reform legislation. In addition, accounting for share-based compensation
arrangements requires significant management judgment and the resulting
expense could vary significantly in comparison to other companies.
Therefore, MicroStrategy believes the use of these non-GAAP financial
measures can also facilitate comparison of MicroStrategy's operating
results to those of its competitors.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is a worldwide leader in enterprise
analytics and mobility software. A pioneer in the BI and analytics
space, MicroStrategy delivers innovative software that empowers people
to make better decisions and transform the way they do business. We
provide our enterprise customers with world-class software and expert
services so they can deploy unique intelligence applications. To learn
more, visit MicroStrategy
online, and follow us on LinkedIn,
Twitter
and Facebook.

MicroStrategy, MicroStrategy 10, MicroStrategy 10.4, MicroStrategy 10.9,
MicroStrategy 10.10, MicroStrategy Desktop, MicroStrategy Web,
MicroStrategy Mobile, MicroStrategy Library, MicroStrategy Server,
MicroStrategy World, MicroStrategy Professional Services, Usher, Usher
Professional and Dossier are either trademarks or registered trademarks
of MicroStrategy Incorporated in the United States and certain other
countries. Other product and company names mentioned herein may be the
trademarks of their respective owners.

This press release may include statements that may constitute
"forward-looking statements," including estimates of future business
prospects or financial results and statements containing the words
"believe," "estimate," "project," "expect" or similar expressions.
Forward-looking statements inherently involve risks and uncertainties
that could cause actual results of MicroStrategy Incorporated and its
subsidiaries (collectively, the "Company") to differ materially from the
forward-looking statements. Factors that could contribute to such
differences include: the extent and timing of market acceptance of
MicroStrategy's new offerings, including MicroStrategy 10.10; the
Company's ability to recognize revenue or deferred revenue through
delivery of products or satisfactory performance of services; continued
acceptance of the Company's other products in the marketplace;
fluctuations in tax benefits or provisions, including changes to U.S.
federal tax laws; the timing of significant orders; delays in or the
inability of the Company to develop or ship new products; competitive
factors; general economic conditions, including economic uncertainty in
the retail industry, in which the Company has a significant number of
customers; currency fluctuations; and other risks detailed in the
Company's registration statements and periodic reports filed with the
Securities and Exchange Commission. By making these forward-looking
statements, the Company undertakes no obligation to update these
statements for revisions or changes after the date of this release.

MSTR-F

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2017

2016

2017

2016*

(unaudited)

(unaudited)

(unaudited)

Revenues

Product licenses

$

32,286

$

38,013

$

93,969

$

113,503

Subscription services

8,525

7,799

32,368

30,574

Total product licenses and subscription services

40,811

45,812

126,337

144,077

Product support

75,032

72,671

289,174

285,079

Other services

22,302

21,625

89,032

83,005

Total revenues

138,145

140,108

504,543

512,161

Cost of revenues

Product licenses

1,994

1,745

7,176

8,573

Subscription services

3,404

3,098

13,435

12,765

Total product licenses and subscription services

5,398

4,843

20,611

21,338

Product support

4,387

4,082

17,481

15,001

Other services

14,968

14,363

58,557

56,808

Total cost of revenues

24,753

23,288

96,649

93,147

Gross profit

113,392

116,820

407,894

419,014

Operating expenses

Sales and marketing

51,977

45,292

174,612

158,740

Research and development

21,419

18,338

78,766

73,142

General and administrative

21,240

16,448

80,161

79,462

Restructuring costs

0

0

0

45

Total operating expenses

94,636

80,078

333,539

311,389

Income from operations

18,756

36,742

74,355

107,625

Interest income, net

1,756

754

5,205

2,203

Other (expense) income, net

(576

)

3,604

(6,953

)

3,218

Income before income taxes

19,936

41,100

72,607

113,046

Provision for income taxes

46,160

9,976

54,964

22,138

Net (loss) income

$

(26,224

)

$

31,124

$

17,643

$

90,908

Basic (loss) earnings per share (1):

$

(2.29

)

$

2.72

$

1.54

$

7.96

Weighted average shares outstanding used in computing basic (loss)
earnings per share

11,447

11,433

11,444

11,425

Diluted (loss) earnings per share (1):

$

(2.29

)

$

2.69

$

1.53

$

7.89

Weighted average shares outstanding used in computing diluted (loss)
earnings per share

11,447

11,558

11,547

11,516

(1) Basic and fully diluted earnings per share for class A and class B
common stock are the same.